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McGraw Hill Financial Inc.'s Standard & Poor's unit must go to state court to face claims by 18 states and the District of Columbia alleging inflated ratings of securities in the run-up to the 2008 financial crisis, a federal judge ruled in a victory for state officials.

U.S. District Judge Jesse Furman in Manhattan today rejected S&P's arguments that attacks by the states on its "issuer-pays" business model raise national concerns that must be heard in federal court. In one of the cases transferred today, Moody's Investor’s Service Inc. was also named as a defendant.

The states claim S&P misrepresented that its credit ratings on mortgage securities were independent and objective. In 17 of the cases, the states claim S&P misled their residents in violation of state consumer protection laws. In two other cases, S&P sued to block states that were about to file their own suits in state court.

"At bottom, the disputes in these cases are disputes arising under state law that belong in state courts," Furman said.